For decades, hospitals have thrived on a fee-for-service model that rewards volume over value. But with health care costs soaring and patients demanding more for their dollar, the traditional model is cracking. Now, many providers are casting a wary eye at value-based care as a potential lifeline.
One of the popular and growing value-based care models is the Medicare Shared Savings Program (MSSP), an initiative where Accountable Care Organizations (ACOs) collaborate to provide coordinated care for Medicare beneficiaries, aiming to improve quality and reduce costs. ACOs that successfully lower spending while meeting quality standards can share in the savings achieved. These ACOs have the option to only take upside risk, meaning they do not pay Medicare if total costs exceed certain benchmarks in the program. Or, they can take on upside and downside risks, meaning if costs are higher than certain benchmarks in the program, they must pay Medicare, but they also have the potential to receive a higher amount of shared savings if they meet or exceed benchmarks in the program.
Many health care organizations that have embraced the two-sided risk model in the MSSP have started to achieve financial success and outpace those in one-sided risk models (note the chart below).
Scaling for success: Where to start
Organizations that are strategically looking to scale to a value-based provider must evaluate the adage model of people, process and technologies considerations. Part of moving to value-based care from fee-for-service is upskilling the workforce on the key drivers at the patient engagement level of how to care for patients that are aligned to value-based care initiatives. Training, education and redefining roles and responsibilities are critical to shifting the behaviors of care givers to align with value-based care models.
Another area of focus to ensure a value-based focus is ensuring organizations have the right technology and processes to capture relevant patient care data points, specifically identifying the key drivers such as chronic disease management, clinical decision support and appropriate care coordination programs.
Lastly, health care providers must ensure the ACO will have the freedom to scale without organizational challenges related to tax structure, people alignment and technology stacks, and the ability to holistically track a profit and loss statement that accurately reflects the results and activities of the organization. Organizations should ensure the appropriate internal stakeholders, clinically and administratively, are engaged across the enterprise.
The takeaway
Hospitals are facing a stark choice: adapt to value-based care or risk falling behind. While fee-for-service has long been the industry standard, soaring health care costs and growing patient needs are forcing a reckoning. Models like the MSSP offer a path forward, but the transition can be challenging. ACOs that have embraced two-sided risk, sharing both gains and losses, have reaped financial rewards while improving patient outcomes. To scale successfully, hospitals must invest in their workforce, harness the power of data and restructure their operations for growth.
Danny Schmidt
Danny Schmidt is a senior manager in the assurance practice and a health care senior analyst for RSM US LLP. As a member of the Industry Eminence program, Danny works alongside the firm’s chief economist and his fellow senior analysts to understand, forecast and communicate economic, business and technology trends affecting middle market businesses.
